A great way of looking at a term life insurance plan is to consider it as an expense on the financial safety of your family, and thereby, make it a part of the household budget. That way, you could actually consider ways to reduce its cost without compromising on the quality of the safety net it provides for your family. Here is how you can lower the premium of your term plan even as you enjoy the best life insurance coverage.
Buy early in life - Life Insurance companies decide the premium rate for a term plan on the basis of their risk perception of the person whose life they will insure. For instance, the mortality rate for a 20-year-old would be considered lower than someone aged 30. So, greater the age of the person to be insured, greater the risk for the insurance company of a death during the term and a claim, and thus, higher premiums. Therefore, if you take a policy early in your life, you get to pay a lower premium. Also, once you have bought a policy, the premium rate usually does not change over the policy term. So, if you buy a policy early in your life, you enjoy the benefit of the lower premium till the end of the policy term. There are also some flexible term plans, which offer enhancement of cover at various life stages, such as wedding and parenthood. These are very suitable if you take them early on in life, as you would enjoy lower premiums while also having the option to increase the sum assured whenever the situation demands.
Stay healthy and benefit from lower premiums
The more healthy and physically fit a person is; the lesser is his likelihood of his dying early, and hence, a lower probability of the insurance companies charging an extra premium. Elsewhere, if a person has a history of diseases or is unfit, then the insurance company could charge some extra premium. Unhealthy habits like smoking and alcohol consumption also lead to extra premium charges.
Buy online - When you buy a policy online, it saves the marketing and distribution cost for the insurance company. Besides, there are other cost savings as well. Since all the personal information of the customer and other data is entered by the customer digitally and is downloaded directly by the underwriting team, it saves a lot of policy administration and operational efforts. Digital transfer of data also ensures that correct data is being entered in the system in the first attempt itself, thereby reducing the cost of errors due to handwritten data interpretation and manual system entry from a paper application form. Whatever cost the insurance company saves on these overheads (courtesy an online purchase by the customer), it passes the same to the customer by way of lower premiums on online term plans.
Opt for an annual mode of payment - To provide flexibility in payment, insurance companies offer many options, such as annual, quarterly and monthly premium payment options, too. But, do note that an annual mode of payment will be less expensive than either of these three. So, if annual payment is not too big a constraint, go for it.
Term plans like HDFC Life Click 2 Protect Plus provide high life insurance coverage at very affordable premiums. You can drive home the advantage of low premiums further with the four steps we have suggested. The money saved can then be smartly invested for growth along with other investments, to help your family fulfill all its dreams.
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First Published On : Mar 10, 2016 10:56 IST